Food Execs Discuss Lessons Learned From International Markets
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The food industry is at an inflection point, transitioning from the immediate and dramatic impact of COVID-19 to a new operating normal as companies learn to manage and care for their employees, customers and suppliers.
I’ve had several conversations with food industry executives over the past few weeks. This time around, I spoke with the executives of three companies with sizable international operations to get their observations and experiences in operating in countries that are reopening:
- Paula Marshall, CEO; Rocky Moore, CFO, Bama Companies, a third-generation Tulsa, Oklahoma-based manufacturer of oven-ready products for quick-service restaurants. Bama’s QSR clients include McDonald’s and Yum Brands, and its international operations include offices in China and Central Europe. Bama Companies is the exclusive pie supplier for McDonald’s restaurants in the U.S.
- Stephen Isaf, CEO, Interra International, an Atlanta-based distributor of a wide variety of food products with a presence in 120 countries. The company specializes in meat and poultry products, dairy (particularly powders and cheeses), sugar, rice, nuts and livestock feed ingredients.
- Paul Maass, CEO, The Scoular Company, is a 120-year-old Omaha, Nebraska-based operation that buys, sells, stores, handles and transports a full range of products for customers in food, feed and renewable fuel markets worldwide. The company also has offices in China, Singapore and South America.
Following is a summary of our discussion.
Experience in Overseas Markets
Bama Companies has a large presence in Europe, particularly through its association with Yum Brands (Pizza Hut, KFC, Taco Bell). Marshall said how the different countries have responded to the pandemic has been illuminating, specifically referencing Bama’s experience in Poland.
“The government in Poland was paying us to keep our people employed,” she said. “They were depositing money directly into our bank accounts telling us to pay the people so no one would get laid off. We’ve been watching how different governments do things differently. Eventually they get to the same spot, they’ve got to start opening back up, and I think that’s going to be very erratic. They’re telling people that to go into a restaurant you have to wear a mask, you have to space people. But how do you do that in a restaurant?”
Marshall also noted that while Bama has seen business start to come back in China in April, “Europe traffic is basically zero and much slower to open up.”
Interra’s Asian headquarters is in Shanghai, so the company experienced China’s shutdown in early January firsthand. While restaurants have been reopening in China, customer traffic is still a shadow of what it used to be, particularly in the smaller restaurants popular with lunch goers.
“In the last two weeks at lunchtime, you’d see one person at a table, one person at a different table,” Isaf said. “Usually these places are teeming with people. So I think it’s going to be a long haul before everyone’s willing to go back to restaurants in the manner in which they did.”
Isaf noted that’s reflected in the demand Interra is seeing for particular products. Pork products considered nontraditional for the Chinese market—such as hams, bellies and shoulder meats used for processing and, eventually, retail sales—are in higher demand than normal, Isaf said. Conversely, traditional products, such as the organ meats that are typically sold in wet markets and smaller restaurants, are slower.
“Our customers are saying product is not moving as well as they had hoped with the reopening, but it is coming back,” Isaf said. “So a lot of our customers are having some cash flow issues there in terms of being able to turn their inventories as fast as they had hoped.”
Nonetheless, Isaf says China has provided a boost to Interra’s business as supply chains have started moving again. Now, it’s the rest of the international market that’s a concern.
“During the time China was having its difficulties, parts of Latin America were very strong, and now we’re starting to see those weaken a bit,” he said. “We’re starting to see companies calling up saying they need more time to pay or are looking to.
“What I’m telling my team is that as we started working from home, we were in a great position,” Isaf continued. “Now I think our challenging times on the international side are just beginning, and I think we’ll see that happen in the U.S. as well, and the blowback that may have on the chain could be very dramatic.”
Changes Coming to Restaurants
Drive-thru sales represented 60% to 70% of QSR revenue before COVID-19. During the pandemic, restaurants with a drive-thru option found themselves in a good position. But how will business dynamics change in the summer and fall as more restaurants are allowed to open their dining rooms in the coming weeks?
“McDonald’s is going to be a lot slower opening up the dining rooms because they’re happy the drive-thrus are working,” Marshall said. “But in Europe they just don’t have that availability. Most of them are urban stores in a tight city setting, they don’t have drive-thrus.”
Marshall noted that while McDonald’s was able to bounce back quickly by focusing on drive-thru with a limited menu, the question of what happens to the dining room experience is more difficult to determine.
Ultimately, there may be a demand shift favoring restaurants with a drive-thru option. “Where Starbucks have drive-thrus they’ve been doing really well,” Marshall says. “But in the metro areas, without drive-thrus, they’ve been challenged Starbucks is a place where people congregate. It remains to be seen how comfortable consumers are going to be going back to that.”
Looking Ahead
Even as states begin to relax stay-at-home orders, the food industry will continue to navigate changes over the next several months. Given that social distancing and continuing fears regarding the virus are going to be part of the new normal, companies across the industry will have to deal with added costs related to health and safety. For restaurants, it’s in maintaining the health and safety of employees and diners. In production and distribution facilities, those added costs include health monitoring tools and equipment, extra cleaning, as well as added payroll costs for things like COVID-19-related bonuses and paid time off.
“We’ve been trying to finely walk that line of making sure we have enough staff while being very conscious on cost and running as lean as possible,” Moore said. “It’s been a dynamic few weeks of shutting everything down, turning everything back on, then trying to find something in the middle that works for everybody.”
As the U.S. economy eases its way back to opening, organizations are looking to other countries for clues. For Isaf, Brazil presents a cautionary tale.
“They opened up, people brought employees back to restaurants, and then they realized nobody was showing up at the restaurants, and three weeks later they terminated those employees and shut the restaurants down again,” he said. “It’s going to be interesting to see what happens over the next three to 10 weeks whether we’re actually going to get real business momentum, more than emotional enthusiasm.
Paul Maass of Scoular noted that the U.S. can learn from Singapore’s example, which experienced an sharp uptick in COVID-19 cases as it first attempted to reopen its economy, causing it to pull back again before opening more gradually. Nonetheless, he said it’s time for the U.S. to start getting back to work.
“We’ve got to find ways to open back up,” he said. “I am encouraged by what we see overseas. We will get through this and things will get back.”
Erica Kuhlmann
Market Executive & Managing Director, Food, Consumer and Agribusiness Group
312-461-2221
Erica T. Kuhlmann is a Managing Director and Market Executive of BMO Commercial Bank's Food, Consumer and Agribusiness Group. The Food, Consumer and…(..)
View Full Profile >The food industry is at an inflection point, transitioning from the immediate and dramatic impact of COVID-19 to a new operating normal as companies learn to manage and care for their employees, customers and suppliers.
I’ve had several conversations with food industry executives over the past few weeks. This time around, I spoke with the executives of three companies with sizable international operations to get their observations and experiences in operating in countries that are reopening:
- Paula Marshall, CEO; Rocky Moore, CFO, Bama Companies, a third-generation Tulsa, Oklahoma-based manufacturer of oven-ready products for quick-service restaurants. Bama’s QSR clients include McDonald’s and Yum Brands, and its international operations include offices in China and Central Europe. Bama Companies is the exclusive pie supplier for McDonald’s restaurants in the U.S.
- Stephen Isaf, CEO, Interra International, an Atlanta-based distributor of a wide variety of food products with a presence in 120 countries. The company specializes in meat and poultry products, dairy (particularly powders and cheeses), sugar, rice, nuts and livestock feed ingredients.
- Paul Maass, CEO, The Scoular Company, is a 120-year-old Omaha, Nebraska-based operation that buys, sells, stores, handles and transports a full range of products for customers in food, feed and renewable fuel markets worldwide. The company also has offices in China, Singapore and South America.
Following is a summary of our discussion.
Experience in Overseas Markets
Bama Companies has a large presence in Europe, particularly through its association with Yum Brands (Pizza Hut, KFC, Taco Bell). Marshall said how the different countries have responded to the pandemic has been illuminating, specifically referencing Bama’s experience in Poland.
“The government in Poland was paying us to keep our people employed,” she said. “They were depositing money directly into our bank accounts telling us to pay the people so no one would get laid off. We’ve been watching how different governments do things differently. Eventually they get to the same spot, they’ve got to start opening back up, and I think that’s going to be very erratic. They’re telling people that to go into a restaurant you have to wear a mask, you have to space people. But how do you do that in a restaurant?”
Marshall also noted that while Bama has seen business start to come back in China in April, “Europe traffic is basically zero and much slower to open up.”
Interra’s Asian headquarters is in Shanghai, so the company experienced China’s shutdown in early January firsthand. While restaurants have been reopening in China, customer traffic is still a shadow of what it used to be, particularly in the smaller restaurants popular with lunch goers.
“In the last two weeks at lunchtime, you’d see one person at a table, one person at a different table,” Isaf said. “Usually these places are teeming with people. So I think it’s going to be a long haul before everyone’s willing to go back to restaurants in the manner in which they did.”
Isaf noted that’s reflected in the demand Interra is seeing for particular products. Pork products considered nontraditional for the Chinese market—such as hams, bellies and shoulder meats used for processing and, eventually, retail sales—are in higher demand than normal, Isaf said. Conversely, traditional products, such as the organ meats that are typically sold in wet markets and smaller restaurants, are slower.
“Our customers are saying product is not moving as well as they had hoped with the reopening, but it is coming back,” Isaf said. “So a lot of our customers are having some cash flow issues there in terms of being able to turn their inventories as fast as they had hoped.”
Nonetheless, Isaf says China has provided a boost to Interra’s business as supply chains have started moving again. Now, it’s the rest of the international market that’s a concern.
“During the time China was having its difficulties, parts of Latin America were very strong, and now we’re starting to see those weaken a bit,” he said. “We’re starting to see companies calling up saying they need more time to pay or are looking to.
“What I’m telling my team is that as we started working from home, we were in a great position,” Isaf continued. “Now I think our challenging times on the international side are just beginning, and I think we’ll see that happen in the U.S. as well, and the blowback that may have on the chain could be very dramatic.”
Changes Coming to Restaurants
Drive-thru sales represented 60% to 70% of QSR revenue before COVID-19. During the pandemic, restaurants with a drive-thru option found themselves in a good position. But how will business dynamics change in the summer and fall as more restaurants are allowed to open their dining rooms in the coming weeks?
“McDonald’s is going to be a lot slower opening up the dining rooms because they’re happy the drive-thrus are working,” Marshall said. “But in Europe they just don’t have that availability. Most of them are urban stores in a tight city setting, they don’t have drive-thrus.”
Marshall noted that while McDonald’s was able to bounce back quickly by focusing on drive-thru with a limited menu, the question of what happens to the dining room experience is more difficult to determine.
Ultimately, there may be a demand shift favoring restaurants with a drive-thru option. “Where Starbucks have drive-thrus they’ve been doing really well,” Marshall says. “But in the metro areas, without drive-thrus, they’ve been challenged Starbucks is a place where people congregate. It remains to be seen how comfortable consumers are going to be going back to that.”
Looking Ahead
Even as states begin to relax stay-at-home orders, the food industry will continue to navigate changes over the next several months. Given that social distancing and continuing fears regarding the virus are going to be part of the new normal, companies across the industry will have to deal with added costs related to health and safety. For restaurants, it’s in maintaining the health and safety of employees and diners. In production and distribution facilities, those added costs include health monitoring tools and equipment, extra cleaning, as well as added payroll costs for things like COVID-19-related bonuses and paid time off.
“We’ve been trying to finely walk that line of making sure we have enough staff while being very conscious on cost and running as lean as possible,” Moore said. “It’s been a dynamic few weeks of shutting everything down, turning everything back on, then trying to find something in the middle that works for everybody.”
As the U.S. economy eases its way back to opening, organizations are looking to other countries for clues. For Isaf, Brazil presents a cautionary tale.
“They opened up, people brought employees back to restaurants, and then they realized nobody was showing up at the restaurants, and three weeks later they terminated those employees and shut the restaurants down again,” he said. “It’s going to be interesting to see what happens over the next three to 10 weeks whether we’re actually going to get real business momentum, more than emotional enthusiasm.
Paul Maass of Scoular noted that the U.S. can learn from Singapore’s example, which experienced an sharp uptick in COVID-19 cases as it first attempted to reopen its economy, causing it to pull back again before opening more gradually. Nonetheless, he said it’s time for the U.S. to start getting back to work.
“We’ve got to find ways to open back up,” he said. “I am encouraged by what we see overseas. We will get through this and things will get back.”
PART 1
4 Food CEOs on Wrestling With COVID-19 Challenges
Erica Kuhlmann | April 01, 2020 | Addressing Covid 19, Food & Beverage
The food industry has been able to survive various shocks throughout its history. But the COVID-19 pandemic has brought a new level of challenges for…
PART 2
3 Food Execs on Preparing for the Next Wave of Challenges
Erica Kuhlmann | April 15, 2020 | Food & Beverage
In the midst of the COVID-19 pandemic, the food industry has been a bright spot in the U.S. economy. Nonetheless, whether you’re a manufacturer…
PART 3
Food Industry Prepares to Face a ‘New Normal’
Erica Kuhlmann | April 27, 2020 | Food & Beverage, Addressing Covid 19
As the COVID-19 crisis continues, the food industry is preparing for a new normal. Already, we can see the beginnings of the transition from operatin…
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